Texas Today: Economic Development Strategies and Business Success Stories

Mali R. Schantz-Feld (Apr/May 09)

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Texans have a knack for creating world-class barbecue - and success in culinary endeavors is akin to their strategy for economic development. Seasoned professionals from all levels of government provide juicy financial incentives and mix in industrial diversity to suit a variety of tastes. They combine those and patiently wait for the deals to gel, adding additional perks to spice up the deal, if necessary. The recipe works whether they are cooking up beef or beefing up the economy. Despite the national economic chill, Texas continues to whet the appetites of businesses and not only close those hot deals but keep `em coming back for seconds.

If Texas were a nation, its economy by gross domestic product (GDP) would be the 12th-largest in the world, according to the Texas Comptroller's 2008 estimates. Gross state product (GSP) for fiscal year 2008 was $1.182 billion, and according to the Controller of Public Accounts, quarterly estimates indicate that in the fourth quarter of 2008, the GSP grew to $1.245 billion.

With a continually expanding population, growth seems to gravitate primarily to major metropolitan areas centered around Dallas-Fort Worth and Houston. More people chose to relocate to Texas in 2008 than any other state, according to Allied Van Lines' 41st Annual Magnet States Report, for the fourth year in a row. The United States Census also estimates that two Texas metro areas increased their populations by more than 100,000 people from 2007 to 2008: Dallas-Fort Worth (147,000) and Houston (130,000). The Austin-Round Rock metro area - part of greater Houston - was one of the nation's fastest-growing metro areas between 2007 and 2008, according to population estimates.

A Pro-Business GovernmentAggressive and competitive recruitment, low taxes, and a reasonable regulatory environment are just a few of the strategies that help the state scale to the top of lists. Aaron Demerson, executive director of economic development and tourism for the Texas governor's office, says that from December 2007 to December 2008, Texas accounted for 80 percent of job gains in the nine states with increased employment. The state's unemployment rate hovered at 6.5 percent in February 2009, nearly two points below the national average. Employment figures released in January by the U.S. Bureau of Labor Statistics show that the two largest markets in Texas, Houston and Dallas-Fort Worth, registered the nation's biggest gains in private-sector employment between November 2007 and November 2008; Houston added 42,400 jobs and Dallas-Fort Worth picked up 35,100. No other U.S. market gained more than 15,600 private-sector jobs during that 12-month period.

The Lone Star State explores incentives to expand existing industry sectors and cultivate new ones. Demerson reports considerable interest in the state legislature for renewable energy and incentives for the film industry. Currently, more than 100 bills deal with solar, alternative energy, and energy conservation. He projects that some new bills will complement legislation passed in prior sessions to promote alternative energy, such as SB 20 (2005), which enabled the Texas Public Utility Commission to select the state's most productive wind zones to develop a transmission network to move power from those zones to various populated areas in the state. "We believe that ultimately this project will see a significant reduction in the cost of power," says Demerson. Several other bills have been introduced during this current legislative session that will increase incentives for the production of films, TV, and video gaming industries.

Demerson says activity in the "deal-closing" Texas Enterprise Fund (TEF), has been instrumental in the announcement of nearly 54,000 jobs and a projected investment of more than $14 billion since its inception. Caterpillar - the global manufacturer of construction and mining equipment, diesel and natural gas engines, and industrial gas turbines - is an example of one of the most recent participants in the fund. In December 2008, Governor Rick Perry announced Caterpillar's worldwide Assembly, Test & Paint operations would locate in Seguin. "At a time when there is so much economic uncertainty, the more than 1,400 new jobs, and nearly $170 million in capital investment is very much opportune and welcomed," says Demerson, who notes that details of the project are still in negotiations. Activity in the manufacturing sector continues to contribute significantly to the state's job growth. Recent announcements in the manufacturing sector from such companies as Santana Textiles and TPCO Enterprise Inc. are expected to result in the creation of 2,800 jobs.

In the past year, Texas has witnessed growth in the renewable energy niches, particularly in wind, solar, clean coal, natural gas and nuclear energy, and biofuels. Companies like HelioVolt, a solar cell/module manufacturer and Vestas, a wind energy R&D firm, have found their future in Texas. Texas also remains home to more Fortune 500 headquarters than any other state in the nation. The variety of industry clusters throughout the state contributes to what Demerson calls the state's "economic diversification process."

In 2004, the Governor's Industry Cluster Initiative identified six industry clusters that focused on building the state's competitive advantage: aerospace and defense, advanced technologies and manufacturing, biotechnology and life sciences, energy, information and computer technology, and petroleum refining and chemical products. In November 2007, the governor appointed 29 public- and private-sector leaders to the Governor's Competitiveness Council to identify the issues affecting Texas' global competitiveness within those clusters. "With these reports as guides, we'll be able to foster existing and developing clusters, like the telecommunication industry, biotech companies, semiconductors, and the growing gaming industry," says Demerson.

Ease for Exporting and LogisticsTexas also shares its bounty with other countries. The U.S. Department of Commerce has named Texas the top exporting state in the nation for the seventh year in a row, based on 2008 export data. Texas' exports increased more than 14 percent over the last year, totaling $192.14 billion. Top export recipients in 2008 were Mexico, Canada, China, the Netherlands, and Brazil. Texas' top exporting industries in 2008 were chemicals, computers and electronics, machinery, petroleum and coal, and transportation equipment.

Logistically, the state provides access to international and national markets in many ways. Starting with more public roads than any other state and a top-ranked railroad system, the state also boasts 13 deep-water ports and convenient air service through Dallas-Fort Worth International Airport and George Bush Intercontinental Airport in Houston.